Correlation Between US Financial and BOEING CDR

Can any of the company-specific risk be diversified away by investing in both US Financial and BOEING CDR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining US Financial and BOEING CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Financial 15 and BOEING CDR, you can compare the effects of market volatilities on US Financial and BOEING CDR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in US Financial with a short position of BOEING CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Financial and BOEING CDR.

Diversification Opportunities for US Financial and BOEING CDR

-0.1

Correlation Coefficient

US Financial  BOEING CDR

Good diversification

The 3 months correlation between FTU-PB and BOEING is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding US Financial 15 and BOEING CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOEING CDR and US Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US Financial 15 are associated (or correlated) with BOEING CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOEING CDR has no effect on the direction of US Financial i.e., US Financial and BOEING CDR go up and down completely randomly.

Pair Corralation between US Financial and BOEING CDR

Assuming the 90 days trading horizon US Financial 15 is expected to generate 0.99 times more return on investment than BOEING CDR. However, US Financial 15 is 1.01 times less risky than BOEING CDR. It trades about 0.17 of its potential returns per unit of risk. BOEING CDR is currently generating about 0.07 per unit of risk. If you would invest  654.00  in US Financial 15 on September 17, 2024 and sell it today you would earn a total of  136.00  from holding US Financial 15 or generate 20.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

US Financial 15  vs.  BOEING CDR

US Financial 15

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

BOEING CDR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BOEING CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, BOEING CDR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with US Financial and BOEING CDR

The main advantage of trading using opposite US Financial and BOEING CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Financial position performs unexpectedly, BOEING CDR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BOEING CDR will offset losses from the drop in BOEING CDR's long position.

The idea behind US Financial 15 and BOEING CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.